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article imageInside the Evolution of Online Video and How It Will Change the Entertainment World

By David Silverberg     Jul 27, 2008 in Internet
Online video is finding more fans as it becomes a prominent arena to showcase user-generated content and network TV shows. But those snack-sized clips may soon change, as YouTube seeks to monetize content and advertisers rally around online video.
Digital Journal — The numbers are staggering: more than half the U.S. population has watched some form of online video; 73 per cent of active Internet users in the U.S. watched video online in May 2008; and U.S. online vid start-ups raised $461 million in 2007, up from $267 million in 2006. If there’s any time to get excited about online video’s potential, it’s now; but the future holds promise that watching TV and clips online will only be more prevalent, once TV networks clamber on board wholeheartedly and user-generated content finds a way to support advertising.
Watching video on the Net is no longer a novelty. Whether it’s movie trailers on YouTube or NBC.com’s full episodes of The Office or watching citizen journalism reports (ahem) from certain trusted sites, the landscape for online video has broadened tremendously. People watch short films and documentaries online like it’s routine leisure time. Uploading clips to YouTube is a good way to get noticed, even if you’re one among millions uploading video that week.
In the past few years, two distinct segments of online video have emerged: short video clips and “over the top” video, as analyst Adam Daum from Gartner Research calls it in an interview with DigitalJournal.com. The snack-sized clips may be professionally produced, such as trailers or TV show clips, or they may fall in the user-generated content category. Quality isn’t important. Short-form video relies on widespread dissemination, but it so far hasn’t attracted advertisers in droves.
On the other end of spectrum, over-the-top video includes TV networks releasing full shows online, either through their own Web channels or on third-party apps like Hulu.com. Daum says this content tries to convey a “televisual experience” in an attempt to bring TV-quality shows to the Web. He notes the ultimate goal is to bring the online shows to the TV set, a dream still years away.
“You can plug your Bravia TV into a broadband connection but how will you find anything?” Daum asks. “Aggregation and navigation are still major obstacles.”
By combining these two forms of online video, viewership is expected to increase incrementally. Forrester Research found multi-platform videos will drive viewership to five hours per day by 2013. The report stated:
Once video becomes this easy to produce, deliver, store, and share, every agent in society will not only want to participate but will have to participate in order to have a shot at reaching people with its products and services.
ABC s online video channel
ABC is jumping into the online video fray by offering streaming video of full TV shows
by Elliot P.

The Joys and Pains of User-Generated Content

If there’s any segment of online video winning the most love, it’s user-generated content (UGC). According to Forrester, UGC accounts for 43 per cent of all online video watched in a typical month, compared to full-length TV shows at 24 per cent.
Sites like blip.tv, break.com, funnyordie.com and Revver are all trying to steal a slice of YouTube’s market share, but they face an uphill battle. YouTube’s interface is extremely easy and its clips can now be easily viewable on iPhones across the world. But with the Viacom-Google lawsuit still looming, it’s unclear what YouTube’s future holds.
“YouTube is here to stay,” claims Bobby Tulsiani, an analyst at Jupiter Research. “It’s more than just pirated video because it is a solid base for consumer-generated content.” He adds how some networks aren’t as skittish as Viacom properties over YouTube’s platform because major firms are often looking for viral ways to promote their shows.
The million-dollar question is how to monetize UGC sites such as YouTube. “Advertising on videos is a slow and steady march, so it wont’ be an instantaneous cash cow,” Tulsiani says.
He says advertisers are clamouring to content such as clips from Lost and Heroes, but they’re “running away from skateboarding dogs on YouTube.” He mentions how “in-between” semi-professional programming such as Rocketboom could attract advertising if they opt to work with companies who will sell ads for them. “Smaller shows don’t have sales forces bounding on the doors on Madison Avenue, like CBS does,” Tulsiani says.
It only makes sense that user-generated content accounts for just 4 per cent of online ad revenue, despite making up for 42 per cent of online streams this year. The study’s author, The Diffusion Group, says the trend will hold for the next five years. But the study authors suggested the best way to make money from UGC is as an ad for professional video that can generate revenue.
Online video will surely enjoy broader monetization plans, but how will advertisers regard the new online vid culture? And how will consumers react to more interruptions to the programming they want free of marketing messages?

The Advertising Equation

Online video is expected to accumulate serious media buying traffic. Online video advertising may reach nearly $7.2 billion in 2012, up from $471 million last year. Since video is attracting the eyeballs, it’s only a matter of time before vid advertising reaches a new plateau.
But advertisers have to approach this medium differently. Anna Maria Virzi, executive editor of ClickZ Networks, advises creative agencies to stop creating ads for online video that also work on TV. “They can carry the same themes, but the ads must work towards becoming interactive. They won’t be the most effective unless they are interactive.”
Anna Maria Virzi of ClickZ Networks
Anna Maria Virzi is leading ClickZ Networks to become a one-stop online-video information powerhouse
Courtesy ClickZ
So far, viewers are bombarded with pre-rolls ads (short ads before a video segment) or end-caps (ads at the end of a clip). But they come with their host of problems. Gartner’s Daum discovered that pre-rolls cause “high dropout rates” among online vid viewers. Pre-rolls can cause abandonment rates as high as 70 per cent. Also, Daum says, pre-rolls before a UGC clip may not be attractive to someone who gets fed up and wants to move on to unobtrusive video.
Overlay and banner ads are also common in many video clips, but will consumers revolt against the prevalence of all these ads clogging the screen space? Daum says the future of online video advertising may herald the rise of behavioural targeting – marketers will know what products and services you like through your surfing habits, tailoring served ads based on your interests.
“Behavioral targeting could spark a privacy backlash,” Daum notes. “There is always a limit on how much advertising there should be.”
How advertising will evolve on online video remains to be seen, but it’s apparent the power of long- or short-form clips is impacting digital living. It could be the movie studio legitimately releasing their summer trailers, or a journalist’s report from a political convention. Every corner of Internet culture is realizing how online video has become a force in the Web 2.0 market.
More about Online video, User generated content, Hulu
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